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Banana market has turned around completely

"Ecuador is sold out"

“Who was expecting this radical change? The year 2015 was one of the worst years in Ecuadorian history for bananas. We weren’t expecting a big change anytime soon, but the market has turned around completely since January 2016 and the demand for Ecuadorian bananas is still exceptionally high. There isn’t enough fruit for everyone”, explains Ad Wehlburg from Exportaciones Durexporta, S.A. in Guayaquil - Ecuador.

The El Niño phenomenon plays a big role in having the worldwide banana market turn around. “Colombia and Costa Rica are dealing with adverse weather conditions. Extreme drought in Colombia and heavy rains in Costa Rica. The Philippines are dealing with severe drought as well, banana diseases (e.g. the Panama disease) and even rodents like rats damage their production. The banana production in the Philippines dropped from an average of 4,000 boxes of 13 kg per hectare per year to 2,000 boxes. This is a 50% decrease in production, let alone the decrease of the export quality bananas. And last but certainly not least, China suffered severe colds in the southern banana producing provinces and their banana producing Island Hainan has even suffered frost. This must have an effect on their production later in this year,” continues Ad.

According to Ad, the only country that has a consistent supply of premium quality bananas year-round is Ecuador. “We also have to deal with some effects of El Niño. Rains, cloudy weather and the lack of sun result in delays in harvesting in some regions of the country, because the bananas cannot get the required export grade in one weeks time. This shortage of bananas on the world market has resulted in sky-high prices. For example, the free market price raised to $10 - $11 for the naked fruit only two weeks ago, or about $13.00 FOB GYE (boxes of 40lb or 18+kg at arrival in destination). The larger (multinational) fruit companies are exporting a large part of the local banana supply since they can afford the high prices. Those companies have logistic advantages, as well as strong brands that can be sold expensively, resulting in advantages that we do not have.”

“Our government obliges exporters to work with yearly contracts with the aim to offer a stable income for the banana farmers during an entire year. This mandatory minimal official price to be paid to the farmers is nothing new, it has been implemented in the 1980s and is considered a form of Social Sustainability. This mandatory minimal price is the only one existing in the world. No other country upholds such a form of Social Sustainability for their banana farmers. I am not opposed to social and environmental sustainability, on the contrary. However, this high official minimal price is pushing us out of the market. All other countries are selling their fruit much cheaper than we can.

“Since the international banana market fluctuates, I strongly believe that the official minimal price should flow with the world market conditions, explains AD. Like last year, in 2015 world market prices were below freezing point. This made it impossible for us to sell our bananas. Everybody lost money on bananas last year, farmers, exporters, importers, brokers, distributors and as well as supermarkets and other retailers. Many went out of business. Although the official price has gone down for 2016 with a mere 16 dollar-cents, it is still high ($6.16) and rigid.”

Other reasons for the Ecuadorian bananas being expensive are the fact that we have a dollar economy, which means so we cannot play around with a local currency. Finally, apart from China, Korea and Japan, we are situated on “the wrong side of South America.” For the East coast of the US, Europe, Russia, the Mediterranean, and the Middle East, we need to go through the Panama Channel. This is costly, time-consuming (resulting in longer transit times), and often shipping lines disconnect the temperature controlled containers for too long.”

Ad stays positive: “On the bright side, we do have the best banana in the world. The bananas grow big and without stress, so we can harvest the fruit relatively young. Besides, the rich deep volcanic soils give our Cavendish variety a thick skin and a firm excellent tasting pulp. All this together means that the Ecuadorian bananas have the longest shelf life. No other banana can beat the Ecuadorian banana when it comes to long transit times, long shelf life, and therefore, less waste for the retailer and the final consumer. There is where the high price of our bananas is compensated. Moreover, our conventional bananas are fumigated far less compared to bananas from e.g. Colombia, Central American countries, the Philippines and China. Meaning the fruit is healthier.”

Ad concludes: “the bad year 2015 had made banana customers cautious. Nobody wanted to seal contracts in October 2015 for the year 2016 since they were still suffering heavy losses. Negotiations started as late as in December, and with the adverse weather conditions mentioned earlier coming more or less at the same time, free market prices went up quickly. Although, we are the market leader in banana exports with 29% of the world market, Ecuador is sold out. There just isn't enough premium quality fruit for everybody. We expect the situation will not change for another 3 to perhaps 5 months. This means we will most probably extend our peak season this year. This might compensate for our losses of last year. Let us hope so.”